Shamrock Capital Advisors, which last year sold the Harlem Globetrotters and has invested in numerous other sports ventures, led the Series D round in FanDuel. NBC Sports Ventures also contributed, as well as private equity firm Kohlberg Kravis Roberts & Co.

“We are big believers in the value of sports, [its] share of the consumer wallet,” said Mike LaSalle, partner at Shamrock Capital Advisors. “Fantasy sports is so important to the teams and the leagues. It produces engagement, and it’s where consumers spend a lot of their time.”

Andrew Cleland, managing director at Comcast Ventures, said that the new round for FanDuel will go toward marketing and acquiring customers. “We know the lifetime value of a customer and it’s very profitable,” he said.

Investors are lining up as they see growing numbers of fantasy sports participants. About 41 million North American consumers are playing fantasy sports this year, up from 33 million in 2013, according to the Fantasy Sports Trade Association.

About 80% of these people are men, and 90% are white, according to the association. They spend about 8.7 hours each week “consuming fantasy.” Each participant spends about $467 per year playing fantasy sports, the association says.

Daily fantasy sports is a small but fast-growing segment of the overall fantasy sports market. FanDuel Chief Executive Nigel Eccles expects about 800,000 people to play daily fantasy sports this year. FanDuel had about 200,000 paid active players through the first half of this year, he said.

The startup hosts online fantasy sports games, where players put up as little as $1 to act as managers of a sports team for a day or week rather than a full season. They draft real players for their virtual teams and then measure the actual performance of their players to tally up whose virtual team beats others. Winning “managers” collect some of the money that’s pooled from all the participants and FanDuel takes a cut.

FanDuel’s revenue was about $14.3 million last year, it said. In the first half of 2014, it collected $11.6 million in revenue, up from $4.2 million in the same period last year.

Last quarter, FanDuel paid out $72.4 million in prizes and expects to pay out about $400 million in prizes this year, it said. The National Football League season is coming up, and that’s the most popular time for fantasy sports participation.

The daily fantasy sports segment has grown exponentially since 2009 when FanDuel launched. That year there were roughly a thousand paying players, Mr. Eccles said.

“We were acquiring two or three players per day,” he said.

In traditional fantasy sports, prizes are awarded at the end of a playing season. Yahoo, CBS and ESPN dominate in this segment. Daily fantasy sports is more immediate, as people only compete on a single day’s games, or a single week’s games in the case of the NFL, and prizes are issued daily and weekly.

“If you think about consumer behavior, everything is getting quicker,” said Jeremy Levine of daily fantasy sports startup StarStreet. DraftKings acquired the principal assets of StarStreet and acquired another competitor in the field, DraftStreet.

DraftKings told Venture Capital Dispatch last week it has hundreds of thousands of weekly active users that are paying customers.

Mr. LaSalle, who calls FanDuel the “larger player,” said it’s important to bolster a leading service provider to attract more users. “In this market, we believe that is a real advantage because it provides the opportunity for players to engage in more games, and more types of games, with more players playing on your platform.”

Comments (3 of 3)

Help me understand... Most states are viewing online poker as gambling, and are reluctant or refusing to let their constituents play within their borders. In Minnesota, I cannot even participate in the "subscription" poker sites allowed by most States. I will be very frustrated if this topic does not receive the same scrutiny from our Gov officials...

12:10 pm September 3, 2014

Makeyourteam.org wrote:

There are sites out there like makeyourteam.org that will create lineups for you to play with. Check it out at makeyourteam.org

10:51 am September 3, 2014

stonefort_usa wrote:

Sounds exactly like gambling to me. I actually thought that was still illegal. Where have I been?

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Produced by the editors of Dow Jones VentureWire, Venture Capital Dispatch tracks the fast-moving developments at the intersection of high-tech innovation and venture capital finance. Featuring the VentureWire reporting team in the Silicon Valley, New York, Boston and Shanghai tech centers, Venture Capital Dispatch provides insight into the newest start-ups and latest trends in venture capital investing. Write us at VCdispatch@dowjones.com. For more information on Dow Jones products covering venture capital and other financial markets, go to http://pevc.dowjones.com.